Background Information
Denmark has a long history of citizen ownership and is one of the EU countries with the highest share of citizen ownership of energy assets. A study from 2019 estimated that 52% of the existing installed wind capacity in Denmark in December 2016 was owned through some kind of citizen ownership model. At the time wind energy produced 37% of the final electricity demand in Denmark and although the authors of the study emphasised the uncertainties in the analysis, they conclude that citizen ownership has contributed greatly to the implementation of Danish wind turbines in 1977–2016 (Gorroño, Sperling & Djørup, 2019).
In a study commissioned by the Nordic Council of Ministers and published in 2019, Denmark was estimated to be the Nordic country with the highest distributed electricity production for potential self-consumption in 2017. It was estimated that Denmark produced over 3.6 TWh, approximately 79% of what was produced in all of the Nordic countries. Most of this electricity stemmed from wind power (Krönert et al, 2019). In 2020, 31.7% of Denmark’s energy consumption consisted of renewable energy and wind power's share of domestic electricity supply was 47% (Energistyrelsen 2022).
All in all, this paints a picture of a rich history of both citizen engagement in energy production and in energy production through wind power.
In a recently published overview of European Energy Communities, it is estimated that there are 633 Energy Communities in Denmark, with a majority (467) subsiding in Jutland (European Commission n.d), (Wierling et al, 2023). Compared to the other Nordic countries included in the overview (Norway, Sweden and Finland), Denmark has more Energy communities than the other three countries combined. It should be noted that the overview applies a broader definition of Energy Communities than the definition for both CECs and RECs. However, it gives an indication of the deployment of citizen led energy initiatives, in relation to the neighbour countries. One explanation to the comparatively large deployment of energy communities could be the aforementioned history of both citizen ownership and wind power in Denmark. Another explanation could be the Danish dependence on fossil fuels in the electricity production, which was 26% in 2021(Rosado & Ritchie, 2021).
The main public bodies regulating and supervising the Danish energy market are the Danish energy agency (DEA) and the Danish Utility Regulator (DUR), both answering to the Ministry of Climate, Energy and Utilities. DEA has the main responsibility for tasks linked to energy production, supply, and consumption. DEA is also responsible for the Danish efforts to reduce carbon emissions as well as supporting the economic optimisation of utilities that, in addition to energy, includes heat, waste, and water. DUR is responsible for securing consumer interests in the utility sectors (electricity, district heating and natural gas) by striving for a higher level of efficiency, the lowest possible costs in the short and long term, a stable and secure supply, and a cost-effective development in technology and climate-friendly initiatives.
Models for Energy Communities & National Legal Framework
The main laws regulating Energy Communities are the law on promotion of renewables (lov om fremme af vedvarende energi) and the law on electricity supply (elforsyningsloven). RECs were included into the law on promotion of renewables in 2021 and in the same year the definitions of both RECs and CECs were set in an executive order which added to the law on electricity supply. Although the legislation discerns between CECs and RECs, the distinction is seldom used in the general discourse. Real-life communities are mostly referred to as Energifælleskaber (Energy Communities), rather than being differentiated as Borgerenergifællesskaber (Citizen Energy Communities) and VE-fællesskaber (Renewable Energy Communities).
The two main models for electricity sharing in Denmark are behind the meter and through the collective grid. Electricity sharing behind the meter is restricted by regulation, making it a solution only applicable within a single building. For example, in the case of a housing cooperative (andelsboligforening) in a building with rooftop PV. Sharing through the collective grid is the only option for other types of communities. Currently electricity sharing through the collective grid is subject to the general tariffs and taxes. However, new tariff legislation has recently been passed, which enables DSOs methods for tariffing energy communities according to their contributions to the collective grid.
An energy community can be organised as an association, partnership, cooperative, or capital company. Often the communities are initiated through already established groups of people, such as municipalities, housing cooperatives (andelsboligforeninger) or eco-villages (økosamfund). Both the preconditions and motives often differ between these groups, resulting in different choices of model for the community.
One common type of community in Denmark is so called Eco-villages (økosamfund), which are usually organised as a communal institution with collective ownership. They often have an overarching motive to obtain self-sufficiency and contribute to sustainable living, also beyond energy consumption and production. The focus is often on heating, of which sharing is not as heavily regulated as sharing of electricity.
Another form of current Energy Communities is housing cooperatives that have installed either PV or hybrid solutions of both PV and heat pumps. Under current regulations community members within one building are able to share the produced electricity internally without using the collective grid.
There are also examples of villages as well as newly established neighbourhoods organised as Energy Communities. These neighbourhoods are often placed so that they can use adjacent areas to produce heat or set up wind turbines. For these, larger types of communities sharing through the collective grid is the most relevant model for electricity sharing.
In August 2022, an executive order on subsidies for local energy communities and local anchoring of the climate transition was passed. The executive order provides for the DEA to issue grants for projects related to developing renewable energy projects by local communities. The purpose of the grants is partly to support information projects that can disseminate information, which can contribute to the development of renewable energy solutions, and partly to support larger projects that can develop common solutions for the establishment, organisation, operation and financing of energy communities locally, and which can increase knowledge of the energy communities (BEK 1162, 2022).
Legal and Practical Barriers
Legal Barriers
One of the presented obstacles for additional deployment of energy communities that reoccurs across literature and many interviews is insufficient opportunities for efficient and cost-effective electricity sharing. Currently, CECs and RECs are not allowed to operate their own distribution networks. While, at the moment, electricity sharing through the collective grid is subject to the general tariffs and taxes. However, enabling tariff models are being proposed and a renumeration or incentivising system for energy sharing is currently being developed and assessed.
As is stipulated in the current EU directive, the creation of an internal grid or microgrid by an energy community would also mean that the energy community would need to adhere to both the role and responsibility of a DSO, including the obligation to ensure third party access. The reluctance to grant CECs and RECs the role of DSO seems to stem from a general concern regarding parallel grids and the risk of either erosion of the collective grid or an undue economic burden for citizens who are not members of an energy community.
One solution to mitigating the economic effects of sharing community electricity through the collective grid was presented in an analysis by DEA published in December 2021. The solution would consist of a local collective tariffing for energy communities, enabling tariffs tailored by the respective community’s contributions to the collective grid (Energistyrelsen 2021).Consequently, this was presented in a legislative proposal that was recently passed (Hoeringsportalen 2022).
Practical Barriers
The knowledge, both technical and juridical, necessary to establish an energy community is presented as a deterrent. This is most likely exacerbated by the fact that, at the time of the data collection for this study, the surrounding enabling framework was not fully established and implemented, leading to some uncertainty on what are, and will be, the preconditions for an energy community. Vis a vis the more exact return of investment calculations and the like for specific business cases.
The need for juridical and technical competence act as a threshold for people who are not knowledgeable in this specific area or are particular enthusiasts willing to spend a large amount of time and effort into understanding the context. The general knowledge, or rather lack thereof, of one’s own energy consumption and energy sources is also presented as an incentive lost due to unawareness. There is access to counselling and every Danish consumer has access to real-time data regarding consumption. However, there may be a discrepancy between the knowledge available, the use of the information sources and the awareness of its existence. Relating to the need for knowledge is understanding and navigating the bureaucratic process surrounding the energy market as well as having an understanding of the processes for permits and complaints as well as the possible response times from various agencies.
Another issue presented is that the main contact point for an energy community is the respective network operator since it provides the connection and decides on the type of tariff to pay, whether it is a production or consumption tariff. This can at times be a bit controversial since they have a monopolistic role and the propensity to aid and inform can vary between different DSOs and their general attitude towards energy communities.
The technological aspects for the implementation of energy communities seem to be in place and are not mentioned as a barrier in any interview on the contrary it is occasionally emphasised that it does not pose an issue.
Examples of Real-life Communities
In the following, examples of energy community initiatives in Denmark are presented:
Example 1, Karise Permatopia, is an eco-village that has developed a common geothermal heating system based on locally produced energy from renewable sources.
Example 2, Avedøre, is Denmark’s first citizen energy community. The community has initiated several projects to develop the production and storage of renewable energy.
Example 3, Københavns solcellelaug, was Denmark’s first solar cell association where citizens can buy shares in urban solar cell plants.